Ex-AIG chief Greenberg must face judge he called biased

Former CEO of American International Group Inc, Maurice "Hank" Greenberg, checks his phone inside a car after leaving a building in downtown New York where he was deposed by the Attorney General's office March 10, 2010. REUTERS/Jessica Rinaldi

NEW YORK (Reuters) - Former AIG chief Maurice “Hank” Greenberg will have to defend himself against claims of accounting fraud in a non-jury trial conducted by a judge he tried to remove for alleged bias.

Justice Charles Ramos of New York state court on Tuesday ruled against Greenberg’s demand for a jury to hear the civil case brought by the New York attorney general.

Earlier this month, a New York appeals court rejected Greenberg’s attempt to remove Ramos from the long-running case. Greenberg claimed Ramos was biased against him and could not preside over a fair trial.

Ramos ruled from the bench in the latest legal wrangling in the 2005 case that accuses Greenberg and the insurer’s former chief financial officer, Howard Smith, of orchestrating sham transactions at the insurer to hide its financial condition.

A spokeswoman for Greenberg’s lawyer, David Boies, declined to comment on losing the bid for a jury.

Attorney Vincent Sama, who represents Smith, who also sought a jury trial, said he may appeal the ruling.

Ramos also heard arguments by the executives’ lawyers on their motions to dismiss the case.

Boies said the lawsuit could not be pursued because Schneiderman no longer had “a viable remedy.”

New York Attorney General Eric Schneiderman, who inherited the case, was forced to drop his claims for as much as $6 billion in damages last year after a class action settlement between AIG shareholders and the executives and others over the allegedly improper accounting.

The attorney general is now seeking “ill-gotten gains” from Greenberg’s compensation, according to attorney David Ellenhorn, who represents Schneiderman.

He also wants to bar the executives from serving as officers or directors of public companies and from participating in the securities business.

Boies argued that Greenberg, 88, has no intention of engaging in the securities business or in acting as a director or officer of a public company.

Greenberg is the chairman and chief executive of the privately held C.V. Starr & Co, which owns Starr Principal Holdings, a registered security adviser. “He is controlling a company that is in the securities business,” Ellenhorn said.

Boies said Greenberg didn’t participate in the management of Starr Principal Holdings or its investment activity.

“That’s nice, but it’s not the whole picture,” Ramos said. “It sounds as if he’s a control person...it opens the door to that influence.”

Still, Ramos did not rule on whether the lawsuit, which was originally brought by former New York attorney general Eliot Spitzer, should proceed to trial.

Greenberg led AIG for nearly four decades before he was ousted in 2005. The next year, AIG paid $1.64 billion to settle federal and state probes into its business practices.

The case is People v Greenberg, et al, New York State Supreme Court, New York County, No. 401720/2005.